gwen: careening toward a cliff. house republicans rebel. senate democrats dig in. and the u.s. economy teeters on the edge. what will it take to avoid calamity? tonight, on "washington week" -- >> it's time for somebody in this town to say yes. >> the only compromise that there is, is mine. >> there are plenty of ways out of this mess. but we are almost out of time. gwen: a stubborn standoff throws washington into chaos. >> this is a time that i think most of us that have watched politics have never seen before. >> it's unfair. it's bizarro. gwen: but compromise remains out of reach. >> folks, we've got to hold the line, we've got to stand strong. gwen: will the nation be able to pay its bills by this time next week? and what are the consequences if

it can't? covering the week, jeanne cummings of bloomberg news, major garrett of "national journal," karen tumulty of "the washington post," and david wessel of the "wall street journal." >> award-winning reporting and analysis, covering history as it happens. live from our nation's capitol, this is "washington week" with gwen ifill, produced in association with national journal. corporate funding for washington week is provided by -- >> we know why we're here, to give our war fighters every advantage. to deliver technologies that anticipate the future today. >> and help protect america everywhere, from the battleground to cyberspace. >> around the globe, the people of boeing are working together to give our best for america's

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once again, live from washington, moderator gwen ifill. gwen: good evening. take your pick of adjectives -- the debt ceiling deadline is looming, or threatening, or imminent. or verbs -- collegiality has collapsed, patience with washington has plummeted. or merely descriptive -- republicans are stubborn, the democrats are job killers. none of this point and counterpoint allows us to escape a troubling truth. unless someone somewhere comes up with a solution that can win votes from democrats and republicans in the house and the senate, the nation will default on its obligations beginning next week. after spurning speaker john boehner's plan yesterday, the house today came up with another approach. which finally passed, but is certain to die in the senate. >> i stuck my neck out a mile to -- i put revenues on the table in order to try to come to an

agreement to avert us being where we are. this house has acted and it is time for the administration and time for our colleagues across the aisle, put something on the table! tell us where you are! gwen: is all this stubborn politics or a divergence in philosophy or both? >> republicans have been doing the hard work of governing this week. >> the house continues to waste time. the senate cannot afford to wait on the house any longer. speaker boehner should just give it up. >> there are a lot of crises in the world that we can't always predict or avoid -- hurricanes, earthquakes, tornadoes, terrorist attacks. this isn't one of those crises. the power to solve this is in our hands. gwen: majorities on both sides says the debt ceiling has to be raised to avoid a fiscal catastrophe. but let's start with this

question -- what happens if it isn't raised? david? >> you're such a pessimist. gwen: just asking. >> the united states government now has less money in its checking account than apple computer has. the united states government spends more money every day than it takes in. as of next week, it will not have enough money to meet all its obligations and although the treasury is being very quiet and mysterious and refusing to answer questions, we know that they are sitting there doing contingency plans saying, which bills are we going to pay and which bills aren't we going to pay? it's very likely they'll continue to pay the interest on the debt. the first interest payment isn't due until august 15. but they'll have to begin deciding which bills not to pay so they have enough cash to meet the obligations they decide to pay. gwen: if you are relying on a social security check to pay your bills this month, is that one of the things that won't get paid next week? >> we don't really know.

there is a social security payment due next week. my expectation is they'll pay that. they haven't said one way or the other. i think they're aware of what would happen if that money doesn't come into people's bank accounts. gwen: so, major, tonight, as we look on what the senate is acting upon based on what the house did this afternoon, what's the table? >> it's not just social security. i was talking to an agriculture lobbyist this week and he said part of his industry went in to talk to the usda and said, will there be meat inspectors wednesday. if it's not inspected, it will rot. the usda said we don't know what will be paid, what will be financed, what obligations of the government will carry on. it's that granularity of government services that is at stake, not just social security checks. the house passed the bill, adding a balanced budget amendment, asking the senate to

pass a balanced budget amendment. no legislative body can order the other legislative body what to do, so that's clearly something for house votes, but senate to deal with. it will be killed in some procedural vote tonight. then the hard work of negotiating something will go on this weekend. importantly in the senate, the killing of the boehner bill, the house bill, will not be final. that will still remain as a legislative option that can be revived quickly and not be subject to the filibuster halass a typical piece of legislation might have to overcome. that suggests the senate and house are keeping the option alive because they imagine a compromise and see a way forward. there is a will, we just haven't found the way. >> so you mean the boehner bill would be a shell filled with a compromise? >> precisely. that is the legislative mechanism being created as we speak. gwen: how did we get to this, jeanne? it feels like we've been talking

about this for several weeks and it escapes me how it got to this point. >> it's been -- the pieces of this have been coming together for a very long time. part of it is re-districting where, back in the 1990's, early 1990's, the number of swing districts in the house was almost 200 out of 435, and then after two re-districting sessions, by 2001, there were 91 of them. so most members only get elected by their own base. and then, more recently, patterns emerged and we saw that two cycles ago, a lot of it last cycle, creating a new disincentive and a very strong members toe for reach across party lines and reach bipartisan deals because they have been threatened on both sides that they're going to have a primary challenge if they

do so. so the way our political system now is composed, it actually has these built in very significant disincentives towards making big deals, towards working together. and we are now seeing the fruits of that evolution in the house in particular. let's talk about the house in particular. john boehner has been a very interesting figure in all of this. at one point he was walking in the back door of the white house and trying to cut a deal with the president. obviously, shamed out of that. so now he came up with his own deal and spent a lot of time last night bringing people in through his front door, recalcitrant republicans, to get them on board. is he wounded by what happened this week? is he strengthened? >> i think what happened this week is that we have seen how little leverage and how weak john boehner really is. you know, he has a leadership style that he has said, you

know, after the top-down leadership style we saw with nancy pelosi, that he wanted to be a consensus leader, that things would come from the bottom up and he won his majority in the house because a lot of these freshmen ran specifically against the establishment and against deals and against the kinds of things that have been sort of the lubricant of washington. so he started out with a very weak hand and i think what we saw this week was how weak it was. gwen: and what we saw today was the reason why nancy pelosi did what she did in that not one single democrat crossed the aisle to support what john boehner said was a bipartisan approach. >> on capitol hill, people said, where is tom delay when you need him? gwen: he didn't have this caucus. >> he had something john boehner does not possess and doesn't

want to possess, earmarks. delay used to lubricate these votes with benefits specific to districts and there's an old joke about someone coming out of meeting tom delay and hey, i've got too -- two bridges but i got no rivers so i'm still a no. >> karen, do you think the public is as polarized as the washington politicians are right now? >> it's interesting. in our most recent poll at "the washington post," eight out of 10 americans are saying they think this is a serious crisis and they are also faulting the congress for not compromising but i do think that this is something that is much bigger than partisanship going on here. and i've seen, if you talk to political scientists, they will tell you that the country has not been this polarized, that the congress has not been this polarized, since the 1890's. so divided government is really

not the problem. have seen some of the biggest legislative accomplishments happen during eras of divided government, but it was at a time in the 1960's and even in the 1990's when people may have different party levels but philosophically there were areas of unison. those have all but ceased to exist in the congress. gwen: i want to follow up with on this, david, the degree of the underlying weakness in the economy, which we saw today with the gross domestic product numbers, whether that's also driving a lot of the discontent. >> i think it's driving a lot of the discontent in the people at large. you cannot overdo how bad these numbers were. the economy grew only .4% in the first quarter, 1.3% in the second quarter. at that rate, unemployment will rise, not fall, and we already have very high unemployment. my sense is there's a lot of

angst out there among the public about their jobs, their wages, their kids jobs, the value of their house and that's translating into anger at everybody that some of the members of congress are reflecting. but i've been stunned, really, by how immune members of congress seem to be to the possibility that they are actually actively making a bad economy worse with these charades on capitol hill. >> one of the things i think in terms of the debt and the economy and how they fit into this is with the debt rising as such an important issue and moneys drying up, that in a period of austerity that we are in right now, the choices are so much harder and the priorities of the parties really come into clear relief, and they clash directly with one another. whereas we saw in the early part of this century when we were -- thought we were flush, we really weren't but we thought so, then

they did everything. they cut taxes and spent money. when you're in that kind of environment, then the differences between the two parties don't clash quite as sharply as they do now. gwen: one of the interesting things that the president kept saying and the people at the white house kept saying is, we're not really that far apart. what is on the table does not have tax increases in it and it's all cuts and not as many cuts as everyone is saying. >> it doesn't have the medicare cuts, either. all the big issues have been pushed to the side and now they're arguing about domestic spending and defense spending cuts where they're very close and procedural mumbo jumbo they don't understand. gwen: and the philosophical question, the balanced budget amendment. >> that's a bargaining chip. the senate may agree to have a debate and a vote. the senate can't give the house a guarantee it's going to find 67 votes for a balanced budget amendment or to rename a post office. but that's what they can offer

them, we'll vote on it, have a debate and see where it goes. one thing i'm struck by talking about this issue and the history of -- in 1985, we had a similar crisis, low-level crisis, never a default situation for raising the debt ceiling and out of that grew the graham rudman hollings budget balancing attempt. that lasted for five years. look at the figures involved. ernest hollings, south carolina democrat. phil gramm, texas and warren rudman, new hampshire. but all three, smart, capable, politically adept and they pulled this together in cooperation with the republican president. i would submit to this table, i don't see those figures in the congress in this current situation. people of stature, political ability, policy expertise.

>> i do think that's one element that is missing in this current clash. in the 1990's, you had bob dole step up during the government shutdowns and say, it's time for the grown-ups to take over. gwen: once again, you had a different membership. >> that's the point. gwen: there was no tea party movement. the question is whether those skills are relevant anymore. you still do have people -- mitch mcconnell knows how to cut a deal. gwen: john boehner used to know how to cut a deal. >> in the tea party culture, first of all, the tea party effect, they have completely changed the conversation in washington where it's top to bottom focused on spending cuts. >> huge success with that. >> and secondly, they've created a culture which for many people the only safe vote on just about anything is no. gwen: and speaking of no being the safe vote, the senate has -- which sets the stage for the

next part of this. >> you mentioned earlier, has the speaker been hurt by what happened over the last 48 hours. it seems to me, from what we were hearing from republican members last night, they are not that angry with him. in fact, many of them feel like, because they're not trading bridges and that sort of thing that they're being treated as adults and having more grown-up conversations and they're being treated respectfully. this vote wasn't pretty but he got through it but i think the much more treacherous vote is the next one and that is when he's going to have to take whatever compromise they reach, assuming that they do, and he's then got to go over and talk to the democrats and try to get the democrats on board. gwen: at the same time get people who weren't -- 22 republicans weren't willing to compromise today on the revised. >> they're gone. >> they might only be able to hold 74 republicans, which means

the only way the house passes the final deal that will eliminate the threat of default is if the democrats come ov and and -- over and bail him out. gwen: here's a question, which at some point, stepping back, we are expecting leadership. part of the frustration we get from americans watching this with astonishment is that it feels nobody is leading this parade. the president seemed to be leading it, then he stepped to the side and is shaking his finger. the speaker can't corral his folks, we don't know what's happening in the senate and we have people who want to be president in 2012 who we've heard very little from except around the edges. >> what we've heard is barack obama is not leading on this. the safe position for the republican presidential contenders has been to criticize obama's leadership. but there have been, last week, for instance, with this cut cap

and balance bill in the house, only nine republicans voted against it, two of them were presidential candidates, ron paul and michele bachmann. she said it didn't go far enough. ron paul said it was an empty promise. the presidential contenders are urging a hard line without offering any specifics. gwen: because they don't have to. >> they don't have to and if they do they run the danger of getting crossways with the establishment republicans who are terrified of a default, and the tea party. so they're essentially merely arguing pretty much of a hard line. about the president himself? do you think his political fortunes have improved in the last two weeks? gwen: we saw a poll today that has him at 40% approval, the lowest of his presidency. >> he was at the lowest last week at 43%, weekly average, 40% now. gwen: is this about disapproval of the president's handling of

this or are the sides dirtying each other up. >> the gallup poll on both parties is bad, so it's pox on both your houses. >> he's managed to alienate his base, antagonize his foes and not accomplish his goals and you can see the frustration in his conversation. gwen: whose base is the most unhappy tonight? >> this is the central question for republicans. at some point you have to understand the physics of pushing against an open door. when this debate started, the president said, i want a debt ceiling increase with no strings attached. that's gone. he introduced a budget that went before the senate and lost 97-0. he abandoned it with a speech in april. house republicans said we want spending cuts and long-term deficit reduction and then they didn't want tax revenue.

that went back and forth, decided no revenue for the time being, up to $2.7 trillion. i submit, these are significant gains in a political conversation initiated by republicans to force a big conversation about a big issue. gwen: they forced a big conversation. >> at some point you have to say to yourself -- i'm saying, any party, what are our goals, what did we achieve and how do we consolidate them. >> the republicans should feel really good right now because the bill that boehner put through was improved in a way to collect even more conservative votes and so it's much more -- gwen: you're saying the democratic base should be more unhappy if they're paying attention to what's on the table now. >> exactly and i think the democratic base won't be happy no matter how this turns out but i think it's entirely possible that over the next 48 or 72 hours that the republican base will become really frustrated and angry because what -- there

was one long-time, congressman tom cole, been around washington for a long time, he said this week, there's a lot of learning going on in our caucus and they're learning they don't own the senate and they can't push pure snow what their proposal is and it was his estimation that that has not completely sunk in yet. gwen: how much is the outside pressure of switchboards lighting up, twitter feeds blowing up, all of the pressure brought by the public saying, get a deal, dog gone it, is there a sense that is seeping through? >> i'm also surprised that we haven't seen a lot of members, at least that i've heard, hearing from their local banker at home, hearing from the local real estate agent at home. these people who feel like they have a lot on the line if, you know, what we are hearing from

some national republicans, people like rick perry who may be running for president, saying, oh, a default wouldn't be so bad, there's money sloshing around. rick perry, the governor of texas. and so it's -- people have been downplaying. gwen: look at wall street, which has been quietly writing letters and saying, hello, hello. >> wall street is stepping up the pressure and the stock market had the worst week in a year, lost 4.2%. i think that the business community outside of washington thought, this is some kind of game, and mitch mcconnell and harry reid have a plan they'll pull out at the 11th hour and it's only in the last few days it began to occur to these guys that the unthinkable might become thinkable. >> also, because of the instability in europe, treasury bonds still remained a good bet. >> and because the economy is tanking so the yields on treasuries are going down. >> i think that created a false

sense of security but i agree with david, people thought this isn't possible, and now they're, like, whoa. >> but it hasn't been totally quiet. there are people who know there are big stakes in the fight. there are a lot of people who don't know what's in the bill, including all of us. we haven't seen it. but big oil knows it's in play here in some fashion, if not immediately, maybe later. they brought in busloads of people. the realtors have been bringing in busloads of people. there is an attempt. gwen: there is an exit strategy that's clear to everybody tonight? or is that still going to emerge in the next 48 to 72 hours? >> i think there is -- the senator from tennessee said that by the time tuesday rolls around, i think something pretty will have happened. it's going to happen, unfortunately, there will be theater before it does. gwen: really? theater? we haven't had any of that. we'll have to suffer through so much more. thank you all so much. thank you all, as well.

we are done here for now but the conversation continues online where we'll continue to sort things out. you can find us at pbs.org. keep up with daily developments with me each night on the news hour. gwen: every thursday get a preview of our shows and panels available at washingtonweekinreview.com. >> washington week" is produced by weta. >> funding for "washington week" is provided by -- >> this rock has never stood

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